Delhi HC Removes Notice Due to Failure to Provide Clear Explanation for Charges

An income tax notice is been quashed by the Delhi High Court because the Assessing Officer failed to establish any insufficiency in the explanation provided.

A writ petition was filed challenging a notice issued under Section 148 of the Income Tax Act, 1961. Additionally, Koa Investment Limited, the petitioner/assessee, contested the Assessing Officer’s decision that dismissed objections against commencing reassessment proceedings.

The petitioner/taxpayer had undergone a scrutiny assessment, leading to an order on 11th February 2015 under Section 142(1) of the Income Tax Act. Before the scrutiny, they were requested to provide various details, including the amount listed in the balance sheet for the relevant year under the category of noncurrent investments.

Even after the scrutiny encompassing the non-current investment amounts, the petitioner/assessee received a contested notice on 27 March 2019 under Section 148 of the Income Tax Act. Importantly, the petitioner/assessee was not provided, alongside the notice, the documentation validating the initiation of reassessment proceedings against them.

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The petitioner/taxpayer clarified that the Rs.1.80 crores invested in OFCD were categorized under non-current investments and not as loans and advances. Additionally, they explained that the balance sheet ending on 31.03.2012 showed an amount of Rs.8,55,00,000/- under non-current investments. Essentially, the petitioner/assessee’s position was that the differential amount of Rs.1,05,50,000/- was part of the total under the noncurrent investment heading.

A Division Bench, including Justices Rajiv Shakdher and Girish Kathpalia, observed a lack of discussion regarding the petitioner/assessee’s explanation in the order rejecting objections dated 17.10.2019.

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They noted the absence of mention of the discrepancies highlighted by Chandra in either the reasons to believe or the order from 17.10.2019. Hence, they concluded that the Assessing Officer lacked grounds to initiate the reassessment proceedings against the petitioner/assessee.

Consequently, the court decided to annul the contested notice dated 27.03.2019 issued under Section 148 of the Income Tax Act and the order from 17.10.2019 that dismissed the objections raised by the petitioner/assessee. This decision was duly noted by the court.

Case	Koa Investment Limited Vs ITO
Citation	W.P.(C) 11670/2019
Date	12.09.2023
Counsel For Petitioner	Mr Anand Kiran Chaudhuri, Mr Kumar Abhishek
Counsel For Respondent	Mr Shlok Chandra, Ms Priya Sarkar, Ms Madhavi Shukla, Ms Vanshika Taneja
Delhi HC	Read Order